An Important Reminder for Landlords re block insurance charges

Author: Caroline Walton

The Upper Tribunal in the recent case of Cos Services Ltd v Nicholson and Willans held that insurance charges made by a landlord of a block of flats were not payable by the tenants as they were not "reasonably incurred". This was so even though the landlord had acted in accordance with the terms of the leases.

This is because, under section 19(1) of the Landlord and Tenant Act 1985, any costs forming part of a service charge charged to residential tenants are only payable to the extent that they had been “reasonably incurred” and it is for the landlord to prove that this requirement has been satisfied.

In this case the landlord had put in place a block insurance policy covering the whole of its property portfolio. The insurance premium charged for the block of flats for each year between 2014 and 2017 exceeded £12,000. This amount was divided between the 16 flats in accordance with the terms of the leases. The tenants however produced evidence of comparable policies with an annual cost of £2,000 to £3,000 and the tribunal agreed with them that the insurance charges made by the landlord were not “reasonably incurred” and therefore not payable.

This case serves as a useful reminder to landlords arranging and renewing insurance for blocks of flats to examine the resulting premium for each block to ensure that it accurately reflects market conditions.

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